February 2021 Health Sector Economic Indicators Briefs

Altarum's monthly Health Sector Economic Indicators (HSEI) briefs analyze the most recent data available on health sector spending, prices, employment, and utilization—helping to fill gaps in the official government data. Below are highlights from the February 2021 briefs:

2020 was first year of national health spending decline:

• National health spending for all of 2020 declined by 2.0% – the first annual decline in a time series that began in 1960. Year-over-year growth for the month of December was flat at 0.0%.
• Spending in December 2020, year over year, declined in some major categories and grew in others. The greatest decline was in spending on dental services, at -15.2%. The greatest increase was in home health care, which grew by 6.0%.
• In December, the recent recovery in health spending reversed in some categories, with spending on hospital care, nursing homes, and dental care declining from November levels.

Records are set as health care price growth increases to kick off 2021:

• ​Following the slight moderation of health care price growth in the final quarter of 2020, health care prices spiked again in January, beginning 2021 at a year over year growth rate of 2.6%. This rate is higher than the average observed in 2020 (2.3%), which was already above the overall long-term trend.
• Price growth for health care services continues to be the major contributor to overall growth with many of the major categories at or near the fastest rate seen in at least the last ten years: January hospital prices rose 4.2% year over year, physician prices rose 3.2%, and nursing home care prices increased 3.3%. Conversely, price growth for prescription drugs was negative, matching the prior month’s rate of -2.4%.
• Hospital price growth was led by prices paid by private insurance, which set a record for year over year growth (5.7%) since that data series began in 2014, while physician price growth was led by Medicare physician prices, which rose a whopping 10.7% year over year, also a record.
• Our implied measure of health care utilization (spending growth net of price/population growth), remained negative in December and actually continued to decline further, falling to -3.3% vs -2.7% in the prior month.

Health care sheds nearly 30,000 jobs in January 2021, largely in residential care:

• ​In January 2021, health care employment declined for the first time since April 2020, falling by 29,600 jobs. The health care workforce is 3.1% smaller now than it was this time last year.
• Hospital and ambulatory care employment was relatively steady in January, with hospitals down 2,100 jobs and ambulatory care settings up 3,500 jobs compared to December 2020.
• The biggest declines came from continuing reductions in nursing and residential care facilities, which dropped 31,000 jobs in January and are down 300,000 jobs compared to this time last year.
• The economy overall added a modest 49,000 jobs in January, while the unemployment rate dropped to 6.3%.
• The source of these jobs data, the BLS Current Employment Statistics, or establishment, survey, underwent annual benchmarking in January, resulting in very slight downward adjustments of 0.1% to estimates of total nonfarm and health care employment.